The quantity of money demanded varies inversely with the ____ rate, but the supply of money is almost perfectly ____ with respect to interest rates.

Question

Quizplus · Accepted Answer

The quantity of money demanded varies inversely with the interest rate, as higher interest rates will make borrowing money more expensive, reducing the quantity of money demanded. However, the supply of money is almost perfectly inelastic with respect to interest rates, as the central bank controls the money supply and is largely unaffected by changes in interest rates. Therefore, only choice C accurately reflects these relationships.

The Quantity of Money Demanded Varies Inversely with the ____